TSMC Slumps 2.77% as Bearish Reversal and Key Support Levels Signal Further Decline

TSMC (TSM) Technical Analysis

TSMC (TSM) closed the most recent session at $294.03, a 2.77% decline, signaling potential bearish momentum. The price action suggests a short-term pullback amid a broader context of volatile trading. Below is a structured technical analysis across multiple frameworks.

Candlestick Theory

Recent candlestick patterns indicate a potential bearish reversal. The price has retreated from a key resistance level around $307.10 (October 7 high) to a support zone near $273.23 (September 29 low). A bearish engulfing pattern is forming as the recent session’s body is larger than the preceding bullish candle. Additionally, the price has tested the $290.49 (October 3 low) support level, which may hold as a critical psychological barrier. If this level breaks, the next support target could be $270.62 (September 26 low).

Moving Average Theory

The 50-day moving average (approximately $275–$280) currently sits below the 200-day moving average ($270–$285), forming a bearish "death cross" in the short term. However, the 100-day MA (~$280) and 200-day MA (~$285) remain in a bullish alignment, suggesting medium-term resilience. The 50-day MA crossing below the 100-day MA in late September marked a bearish signal, but the 200-day MA remains above the 100-day MA, indicating the long-term trend is not yet reversed.

MACD & KDJ Indicators

The MACD histogram shows a recent bearish divergence, with declining bars despite a temporary price rebound on October 1–6. The MACD line (12-day EMA minus 26-day EMA) has crossed below the signal line (9-day EMA), confirming a bearish crossover. Meanwhile, the KDJ indicator is overbought (K-line at ~85, D-line at ~75), but the stochastic lines are converging downward, suggesting a potential reversal. However, the KDJ "death cross" (K-line crossing below D-line) has not yet occurred, leaving room for a bullish bounce.

Bollinger Bands

Volatility has expanded recently, with the upper band reaching $307.10 and the lower band dropping to $270.62. The price is currently near the lower band, indicating oversold conditions. A break above the $290.49 level could trigger a reversion toward the mid-band ($285–$290), while a breakdown below $270.62 may force further volatility expansion.

Volume-Price Relationship

Trading volume surged on the October 1–6 rally, confirming the bullish move. However, the recent 2.77% drop occurred with moderate volume (~13.1 million shares), weakening the bearish signal’s validity. This divergence suggests the downtrend may lack conviction unless volume amplifies during the next decline.

Relative Strength Index (RSI)

The 14-day RSI has dipped to ~35, entering oversold territory. While this may attract short-term buyers, the RSI remains below 50, reflecting bearish momentum. A close above $300 would likely push RSI back into neutral territory (~50–60), but sustained bullish momentum would require a break above $307.10.

Fibonacci Retracement

Key Fibonacci levels from the recent high ($307.10) to low ($270.62) include 23.6% at $294.50, 38.2% at $290.00, and 50% at $288.86. The current price near $294.03 is testing the 23.6% retracement level, which may act as a temporary support. A break below $290.00 could target the 38.2% level ($290.00) and then the 50% level ($288.86).

Backtest Hypothesis

The backtest strategy relies on MACD and KDJ death crosses to trigger sell signals. Historical data from 2022 to 2025 shows no instances of MACD or KDJ death crosses for TSMC, despite significant price fluctuations. For example, during the 2024–2025 rally, the MACD remained positive, and the KDJ indicator consistently trended upward, reflecting sustained bullish momentum. This absence of death crosses aligns with TSMC’s strong fundamentals, including its leadership in advanced semiconductor manufacturing. The strategy would have missed sell opportunities due to the stock’s prolonged bullish phase, highlighting the importance of integrating fundamental analysis with technical indicators.